Taxing credit unions would just help big banks at expense of consumers

Credit union members in North Carolina save $43 million on fees, according to advocates.
Credit union members in North Carolina save $43 million on fees, according to advocates. 2011 Getty Images File Photo

Yaël Ossowski’s op-ed challenging credit unions’ tax exemption (“Why should banks pay taxes while credit unions get a break?”, Oct. 20) goes sharply to specifics, dismissing millions of North Carolinians who see nearly $430 million in benefit thanks to credit unions. The tradeoff for his proposed leveling would be at least a five-fold tax on no fewer than 4 million fellow citizens.

First, it is important to put things in perspective. This challenge is neither new nor untested. Each time it has been posed over several decades, citizens and Congress have reaffirmed the value of credit unions and consumers’ choice in the matter.

From their early 1900s arrival in America and North Carolina, credit unions have been not-for-profits not only because they offer service where it has been lacking or withdrawn, but also because they are cooperatives owned by every account holder. In their boardrooms are volunteers making each decision – including compensation – to the benefit of members rather than stockholders. Furthermore, credit unions do pay property, employment and other taxes.

And credit unions remain good stewards of the trust of Congress and consumers. When bank failures led to 2009’s Great Recession and brought our economy to its knees, credit unions pooled resources to recover while continuing to lend. Meanwhile taxpayers funded billions in governmental bailouts for the for-profit banks.

To his credit, Mr. Ossowski is correct in assessing today’s North Carolina marketplace. Five of North Carolina’s top 15 financial institutions are credit unions. Their combined assets are just 1.7 percent of the 10 banks’ $2.47 trillion.

Meanwhile many of the for-profits have their own opportunities for relief. More than 2,000 Subchapter S banks nationwide will realize an estimated $984 million in benefit in 2017, a 38 percent reduction in federal revenue redirected to Sub S bank owners. And any bank overwhelmed by the advantage of credit union status is welcome to become one.

The true value of potential taxation revenue is in its impact on the people those taxes are to serve. For every dollar the federal government could collect from credit unions, the not-for-profits provide nearly six times that in financial benefits to members. Should the government take that away, it actually stands to lose $38 billion in revenue over 10 years according to January’s results of a study commissioned by the National Association of Federal Credit Unions.

The Credit Union National Association estimates annual credit union benefits to North Carolinians in 2016-17 at $429 million, including a savings of nearly $43 million to members from fewer and lower fees. As for interest charges, consider that the average credit union auto loan will save a member $703 in interest compared with the rate at a for-profit, stockholder-owned bank. That’s a pat on the back, not a slap in the face.

Whether credit unions have outgrown their allowance is a big question not to be answered in select details. Step back and it’s clear that an income tax on member-owned credit unions takes from the pockets of millions of North Carolinians to appease for-profit banks. How is that fair?

Radebaugh is president and CEO of the Carolinas Credit Union League.